[Options] Sprinting to Win the Marathon

Sean McLaughlin
May 31, 2023

My spidey senses are beginning to tingle with speculative fervor.

What we're seeing in the AI space as well as in the comeback in cryptocurrencies as of late has me thinking speculative players are soon to begin widening their net to capture alpha.

And some of these highly shorted equities with crypto exposure could be extremely ripe for short squeezes.

High on this list is Marathon Digital Holdings $MARA. It currently has in the neighborhood of 40% of its outstanding shares held in short positions. That is some major fuel for a short-covering rally if this stock starts ripping.

Here are a bunch of pictures illuminating why we think $MARA might be set up for a run higher. First up, the $MARA chart:

The bounce off the 2022 year-end lows has been nothing short of impressive. And the recent consolidation is well deserved.

Secondly, $MARA has traded pretty much in lockstep with bitcoin (which we're bullish on) since the start of the year:

And with $QQQ breaking out and sector rotation popping up, it feels like its only a matter of time before $MARA and other crypto-related equities play catchup:

And with implied volatility at the lowest levels of the year in $MARA options, buying some upside calls is a relatively affordable way to play a short squeeze with leverage.

Here's the Play:

I like buying $MARA January 14 calls for approximately $1.85 per contract. This premium I pay today is the most I can lose if I'm wrong.

And if $MARA sees a close below $8 at any time during my hold, that's my signal that I'm wrong and I'll look to exit the calls for whatever I can salvage.

If $MARA launches its catchup trade and makes a run towards last summer's highs, then I'll look to exit half of my position when I can sell my calls for double what I paid today. This pays me back my original risk capital but still leaves me positioned for additional upside if speculative fervor takes over. If it does, we'll enjoy the #FreeRide into January!

If you have any questions on this trade, please send them here.

ASO subscribers who missed last week’s video Jam Session where we reviewed activity in our options portfolio from the past week can catch it here.

~ @OptionsSean

P.S. We do trades like this regularly. If you'd like to leverage Best-in-Class technical analysis into smarter directional options trades, try out All Star Options Risk Free! Or give us a call to learn more: 323-421-7991.

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